Oil prices continued their downward trend for the fourth consecutive day as concerns over geopolitical risks eased and US inventories surged to their highest levels since June.
The global benchmark Brent fell below $87 a barrel following a 3% decline on Wednesday, while West Texas Intermediate hovered around $82. This drop came as US crude inventories increased by 2.7 million barrels last week, accompanied by a decrease in fuel demand indicators.
The market had previously rallied earlier in the month amid anticipation of potential Iranian actions against Israel. However, with no escalation occurring, the geopolitical risk premium, estimated at $5 to $10 per barrel, began to dissipate, according to Goldman Sachs Group Inc.
Giovanni Staunovo, a commodity analyst at UBS Group AG, attributed part of the price decline to the lack of bullish indicators in the recent EIA report, combined with the diminishing geopolitical tensions.
Additionally, technical selling on Wednesday contributed to the downward pressure on crude prices.
Despite the recent decline, oil prices remain higher year-to-date due to supply cuts by OPEC+ members and ongoing geopolitical risks in regions such as the Middle East and Russia. However, the previously speculated ascent towards $100 a barrel has faltered, with certain market indicators suggesting slightly less tight conditions.
The focus has also shifted to US sanctions, with President Joe Biden's administration reimposing restrictions on Venezuelan oil and including new sanctions on Iranian oil as part of a foreign aid package proposed by House Republicans. These measures may impact the flow of oil from both Venezuela and Iran.
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